Amazon.com Inc.’s share price up, posts thin profit amid expansion push

Despite announcing a revenue growth that has been better than initially expected, Amazon.com Inc. once again posted sparse profit due to the large expenses it had in cloud computing and shipping. The company also dispelled concern about the cost increase of its video and Prime unlimited shipping service.

Amazon.com Inc. made an official statement, revealing that its revenue over the first quarter of the current financial year rose by 23% from 16.1 billion dollars in the first quarter of 2013 to 19.74 billion dollars. The results are higher than the analysts forecasts of a 19.43-billion-dollar revenue. Amazons costs, however, also rose by 23% in the period, which shrank the companys profit to 23 cents a share, in line with analysts expectations.

Amazons net income increased from 82 million dollars in 2013 to 108 million dollars. The total operating expenses rose from 15.9 to 19.6 billion dollars.

As reported by the Wall Street Journal, one of the analysts, who work for RW Baird – Mr. Colin Sebastian commented on the results posted by the company: “The revenue beat is positive given concerns investors had following slower unit growth during the holiday period.”

Mr. Jeff Bezos, who is the current Chief Executive Officer of Amazon.com Inc., has been recently investing heavily in expanding the companys reach. Mr. Bezos is betting on accelerating the companys shipments by building more warehouses. Moreover, Amazon.com is also including new services to its portfolio, which are believed to make the company more competitive in order to face the rivalry of companies like Netflix Inc. and Apple Inc.

Under the lead of Chief Executive Officer Bezos, the company is also spending heavily on expansion in overseas countries, besides investing in its core businesses in the U.S. and Canada. Staying competitive and maintaining its positions on the market are some of the main reasons why Amazon is pouring money in infrastructure in China.

The Chief Financial Officer of the company – Mr. Tom Szkutak commented in the statement, which was cited by the Financial Times: “We’re doing a lot on the retail basics. Making sure we have good in-stock availability, making sure that we have some of the unique [product] selection. (…) Making sure we have the right pricing. (…) Making sure our service levels are where we need them to be. Is it a large investment? Yes it is. And that investment has certainly increased over the last several years.”

Amazon.com Inc. was 3.87% up to close at 337.15 dollars per share yesterday, marking a one-year change of +25.44. According to the information published on CNN Money, the 38 analysts offering 12-month price forecasts for Amazon.com Inc. have a median target of 435.00, with a high estimate of 500.00 and a low estimate of 330.00. The median estimate represents a +29.02% increase from the last price of 337.15.